Investors love dividend stocks, but not every income-generating stock is a buy.

So which companies have the highest dividend yields but are also rated "sell"? Three stocks in the S&P 500 Index that offer high dividends also have sell ratings attached to them, according to TheStreet Ratings.

Here are the three worst-rated dividend stocks in the S&P 500 Index, with ratings from TheStreet Ratings for added perspective.

TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Note: Stock ratings are as of Nov. 8, 2015.

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3. Allegheny Technologies Inc. (ATI - Get Report)
Industry: Materials/Steel
Annual Dividend Yield: 5.03%
Year-to-date return: -58.9%

Allegheny Technologies Incorporated produces and sells specialty materials and components worldwide. The company operates through two segments, High Performance Materials and Components; and Flat-Rolled Products.

TheStreet Said: TheStreet Ratings team rates ALLEGHENY TECHNOLOGIES INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

We rate ALLEGHENY TECHNOLOGIES INC (ATI) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins and feeble growth in its earnings per share.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 20557.1% when compared to the same quarter one year ago, falling from -$0.70 million to -$144.60 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, ALLEGHENY TECHNOLOGIES INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The gross profit margin for ALLEGHENY TECHNOLOGIES INC is currently extremely low, coming in at 2.29%. It has decreased significantly from the same period last year.
  • ALLEGHENY TECHNOLOGIES INC's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ALLEGHENY TECHNOLOGIES INC continued to lose money by earning -$0.02 versus -$0.93 in the prior year. For the next year, the market is expecting a contraction of 3000.0% in earnings (-$0.62 versus -$0.02).
  • This stock's share value has moved by only 53.07% over the past year. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • You can view the full analysis from the report here: ATI

 

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2. Avon Products Inc. (AVP - Get Report)
Industry: Consumer Non-Discretionary/Personal Products
Annual Dividend Yield: 7.64%
Year-to-date return: -66%

Avon Products, Inc. manufactures and markets beauty and related products worldwide.

TheStreet Said: TheStreet Ratings team rates AVON PRODUCTS as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

We rate AVON PRODUCTS (AVP) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio is very high at 55.23 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, AVP has a quick ratio of 0.60, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Personal Products industry and the overall market, AVON PRODUCTS's return on equity significantly trails that of both the industry average and the S&P 500.
  • AVP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 69.34%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Net operating cash flow has decreased to $88.20 million or 16.39% when compared to the same quarter last year. Despite a decrease in cash flow of 16.39%, AVON PRODUCTS is still significantly exceeding the industry average of -84.44%.
  • AVP, with its decline in revenue, underperformed when compared the industry average of 0.4%. Since the same quarter one year prior, revenues fell by 16.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: AVP

 

 

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1. Peabody Energy Corp. (BTU - Get Report)
Industry: Energy/Coal & Consumable Fuels
Annual Dividend Yield: 8.71%
Return since Oct. 1 after stock split: -17.7%

Peabody Energy Corporation offers mining of coal. The company operates through Western U.S. Mining, Midwestern U.S. Mining, Australian Mining, Trading and Brokerage, and Corporate and Other Segments.

TheStreet Said: TheStreet Ratings team rates PEABODY ENERGY CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

We rate PEABODY ENERGY CORP (BTU) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 102.3% when compared to the same quarter one year ago, falling from -$150.60 million to -$304.70 million.
  • The debt-to-equity ratio is very high at 4.81 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.46, which clearly demonstrates the inability to cover short-term cash needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PEABODY ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for PEABODY ENERGY CORP is currently extremely low, coming in at 11.62%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -21.47% is significantly below that of the industry average.
  • BTU's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 90.43%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • You can view the full analysis from the report here: BTU